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By Doug Laney

Gartner, Inc.

Many people regularly swipe their loyalty cards at the grocery store and watch as the register automatically discounts certain items. But in exchange for all of these great discounts, what does the store receive? Information, of course. In reality, “loyalty-based discount” is code for “free food in exchange for information about you and your purchase.” More than your loyalty, grocers and other merchants with similar programs are after your data. But is the value of that information accounted for or does it disappear as quickly as the bagger stuffs your purchases into your cart and off you go out the door?

The Information Economy Matures

"The information about the package is just as important as the package itself," FedEx CEO Fred Smith proclaimed more than three decades ago. Since then, this realization and mindset has swept across every corner of commerce. Recently, we see companies purely in the business of accumulating and selling data with stratospheric valuation multiples. The grocer "loyalty" example has been around for decades, but it's a business-to-consumer (B2C) model. Some business leaders today are realizing that this model can be extended to B2B scenarios as well. And Big Data aids and abets this opportunity.

Most notoriously, retailers and, yes, grocers such as Dollar General, Rite Aid and Kroger have made certain datasets commercially available to partners, suppliers and others for a fee. Kroger generates an impressive $100 million annually in incremental revenue this way. Indeed, businesses in nearly every sector from telecommunications to energy to manufacturing to financial services have sought counsel on forming internal efforts to package, productize, price and promote their own information products. And as you would expect, during the past few years, information marketplaces (e.g., Microsoft Azure, ProgrammableWeb, Datamarket.com, and Quandl) have emerged as eBay-like matchmakers for sellers and buyers of data. Even eBay itself has gotten in on the action, with a new category for "information products."

Not Accounting for What Counts in Information Barter Transactions

But before we get overly fixated on selling data for cash, let's discuss an interesting aspect in the value exchange: taxation. Yes, taxation. Back to grocer's loyalty cards. Remember, shoppers trade information about themselves and their purchases in exchange for some portion of their food purchase, not cash. According to generally accepted accounting principles (GAAP), discounted transactions are recorded at the value of the money exchanged, not the cost of goods. Cash is king in these transactions. However, if we presume or demonstrate that the grocer is monetizing the incremental data received by virtue of a personally identifiable loyalty card being used, then the transaction (or part of it) ostensibly becomes a barter transaction. Stay with me now …

Barter transactions are recorded by both parties based on the value of the good or service received, yet there's no requirement that both parties perceive the same value for what they've received. Here's the rub: data has no value according to the accounting profession. That's right, despite what 80% of business executives surveyed by Gartner contend, a company's information assets are not assets at all —at least and quite conveniently by neither the accounting profession nor government revenue services (e.g., the U.S. Internal Revenue Service [IRS]). Even for companies such as ACNielsen and Standard & Poor’s that long have been purveyors of data, and more recent ones such as Google, Facebook and Twitter, their vast storehouses of information assets are nowhere to be found on their balance sheets.

Tax Break?

Therefore, if companies receive information in return for providing any good or service, arguably this value of the transaction for accounting and tax purposes could be recorded as zero or negligible. Now you may not want to find yourself in a position of arguing this in front of an IRS auditor or tax court, but consider how the everyday grocery transaction is an example of how to better leverage information assets.

Tax advantages or not, bartering with or for data opens up new avenues of commerce, even for traditional businesses. Information has evolved from being a business byproduct to a business performance fuel, and now to an accepted form of legal tender. Organizations that cultivate, manage and are prepared to leverage this new-age currency increasingly have an array of revenue streams and commercial options available to them. Welcome to the world of infonomics.

Doug Laney is a research vice president for Gartner, where he covers business analytics solutions and projects, performance management, and data-governance-related issues.